The Executive Board of the International Monetary Fund, (IMF) has completed the sixth review of Uganda’s economic performance under the program supported by the Policy Support Instrument (PSI).
In completing the review, the Board approved the authorities’ request for a one-year extension of the current PSI arrangement to facilitate policy continuity and allow sufficient time for ongoing structural reforms to progress and also granted a waiver of the nonobservance of the end-December 2015 assessment criteria on the overall deficit of the central government.
The PSI for Uganda was first approved in June, 2013. Uganda’s program under the PSI aims at maintaining macroeconomic stability and alleviating constraints to growth. The program supports the authorities’ objectives on reforms to the monetary policy framework, tax revenue mobilization, public financial management, and financial sector development. It also backs efforts to improve the business environment, including by preparing the economy better for oil production.
Following the Board discussion, Mr. Min Zhu, Deputy Managing Director and Acting Chair, made the following statement:
“Despite external shocks, and amid election-related uncertainty, Uganda’s economy demonstrated resilience, with robust growth, low inflation, and strong international reserves. However, structural reforms have lagged and need to be revitalized to enhance competitiveness, promote economic diversification, and foster sustained and inclusive economic growth.
“Economic policies will remain focused on keeping inflation low and boosting growth. Fiscal priorities include shifting public spending toward infrastructure and poverty-alleviating expenditures, boosting domestic revenue mobilization, and enhancing public investment efficiency. Continued fiscal prudence could facilitate further monetary policy easing, which would help ease tight credit conditions.
“More progress is needed on key structural reforms. Prompt parliamentary approval of the Public Financial Management Act regulations in line with international best practice, decisive action to reconcile and validate the stock of domestic arrears, and finalizing the charter of fiscal responsibility are paramount steps to further improve governance and strengthen the budget process.
Final approval of legal amendments to the Bank of Uganda Act will strengthen the central bank’s independence and support the inflation targeting regime.
“Vigilance is needed to ensure continued financial stability. Plans to further strengthen prudential supervision in line with the Basel III guidelines are welcome. Ensuring that regulatory oversight keeps pace with financial innovation will help preserve financial stability. Prioritizing prompt parliamentary approval of the Amendments of the Anti-Money Laundering Amendment Act and the Insurance Act should help Uganda exit from the FATF gray list, further strengthening the investment climate.”